[Federal Register Volume 60, Number 152 (Tuesday, August 8, 1995)]
[Rules and Regulations]
[Pages 40267-40270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19544]



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FEDERAL TRADE COMMISSION
16 CFR Part 248


Guides for the Beauty and Barber Equipment and Supplies Industry

AGENCY: Federal Trade Commission.

ACTION: Elimination of guides.

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SUMMARY: The Guides for the Beauty and Barber Equipment and Supplies 
Industry (the ``Beauty/Barber Guides'' or the ``Guides'') designate as 
unacceptable certain advertising and trade practices relating to the 
sale of products used by, and/or marketed through, ``industry members'' 
(as defined in Section 248.0 of the Guides) such as barber shops, 
barber schools, beauty parlors, beauty salons, beauty clinics, and 
organizations or corporations engaging in the manufacture or 
distribution of industry products. Such products embrace a wide range 
of beauty and barber preparations, as well as articles or items of 
equipment, furnishings, and supplies for such establishments.
    The Commission believes that the Beauty/Barber Guides do not 
provide guidance substantially specific to the beauty and barber 
equipment and supply industry. In addition, the Commission believes 
that, in some instances, the Guides no longer accurately represent 
current Commission policy, and would require extensive revision to be 
made up-to date. Although such a revision and reissuance might be 
warranted if there were evidence of widespread marketing abuses of the 
type addressed by the Guides, the Commission has no such evidence. In 
addition, the Commission believes that likely abuses, if any, are 
adequately addressed under applicable antitrust, consumer protection, 
and commercial tort laws, which are matters of public record. 
Consequently, the Commission believes that there is no continuing need 
for the Guides, and that they should be repealed in their entirety.
    Although the Commission is eliminating the Guides, proceedings 
still may be brought against businesses under Section 5(a)(1) of the 
Federal Trade Commission Act (the ``FTC Act''), 15 U.S.C. 45(a)(1), for 
engaging in unfair or deceptive acts or practices in or affecting 
commerce in the advertising and sale of beauty and barber equipment and 
supplies. Proceedings also may be brought under Section 5(a)(1) of the 
FTC Act against businesses engaging in unfair methods of competition.

EFFECTIVE DATE: August 8, 1995.

ADDRESSES: Requests for copies of this document should be sent to the 
Public Reference Branch, Room 130, Federal Trade Commission, 
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Douglas J. Goglia, Attorney, Federal Trade Commission, New York 
Regional Office, 150 William Street, 13th Floor, New York, NY 10038, 
(212) 264-1229.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    As a part of its ongoing project to review all rules and guides, 
the Commission invited comment on its Guides for the Beauty and Barber 
Equipment and Supplies Industry, 16 

[[Page 40268]]
CFR Part 248, on April 4, 1995.\1\ The notice contained, with minor 
modification, the standard regulatory review questions relating to the 
economic impact and continuing relevance of the Guides; burdens or 
costs related to adherence to the Guides; benefits conferred on 
industry members by the Guides; changes needed to minimize the economic 
impact of the Guides; their relation to other federal, state, or local 
laws or regulations; changes in relevant technology or economic 
conditions since the Guides were issued; and the effects of those 
changes on the Guides. The comment period ended on June 4, 1995, and 
only one comment was received before that date.\2\ One additional 
comment was received on June 16, 1995, after the comment period 
expired.\3\

    \1\ Request for Comments Concerning Guides for the Beauty and 
Barber Equipment and Supplies Industry, 60 FR 17032, (April 4, 
1995). The record in this proceeding has been designated P 958803 in 
the Commission's Public Reference Branch.
    \2\ The National Cosmetology Association (``NCA''), a national 
association of cosmetologists, barbers, estheticians, nail 
technicians, and owners of independent salons, stated that (1) the 
Guides have been effective in protecting industry members from 
problematic conduct, and (2) ``[m]ost industry members do not have 
resources available to hire attorneys to counsel them with respect 
to [trade regulation] laws. Thus the Guides are the principal means 
by which the industry is continuously reminded of how those laws 
apply to the industry.'' Comment of Messrs. William W. Scott, J. 
Keith Ausbrook and Brian R. Henry, Counsel for the National 
Cosmetology Association (June 2, 1995).
    \3\ The Beauty and Barber Supply Institute, Inc. (``BBSI'') 
stated that: `` we have no objection to the recommendation that Part 
248--Guides For The Beauty And Barber Equipment And Supplies 
Industry, be deleted in its entirety from the Code of Federal 
Regulations.'' Letter from Douglas A. Kash, Esq. to Douglas Goglia, 
Esq., June 22, 1995 (regarding Amendments to the Code of Federal 
Regulations).
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II. Background

    The Beauty/Barber Guides were first published on August 23, 1968 
under the authority of Sections 5(a)(1) and 6(g) of the FTC Act, 5 
U.S.C. 45(a)(1) and 46(g). They were intended by the Commission to 
supersede trade practice rules for the Beauty and Barber Equipment and 
Supplies Industry, which had been promulgated on August 9, 1941. They 
designate as unacceptable certain advertising and trade practices 
relating to the sale of products used by, and/or marketed through, 
``industry members'' (as defined in Section 248.0 of the Guides) such 
as barber shops, barber schools, beauty parlors, beauty salons, and 
beauty clinics. Such products embrace a wide range of beauty and barber 
preparations, as well as articles or items of equipment, furnishings, 
and supplies for such establishments.
    Like other Commission guides, the Beauty/Barber Guides were 
``intended to encourage voluntary compliance with the law by those 
whose practices are subject to the jurisdiction of the Commission, and 
were published in the belief that a businessman who is fully informed 
of the legal pitfalls he may encounter can conduct his affairs so as to 
avoid such difficulties.'' \4\ The Guides provide instruction regarding 
the use of trade names, symbols, and depictions; the defamation of 
competitors or the false disparagement of their products; false 
invoicing; push money; discriminatory advertising or promotional 
allowances, or services or facilities; commercial bribery; enticing 
away employees of competitors as a means of restraining competition; 
inducing breach of contract; exclusive dealing arrangements; and price 
discrimination.

    \4\ Statement by the Commission, 33 FR 11987 (August 23, 1968).
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III. Discussion

    The Commission has concluded that the Beauty/Barber Guides do not 
provide guidance substantially specific to the beauty and barber 
equipment and supply industry. In general, the Guides merely restate 
basic principles of consumer protection and commercial tort law. In 
addition, certain sections describe conduct that may be proscribed by 
Section 2 or 3 of the Clayton Act, as amended by the Robinson-Patman 
Act, and certain conduct that may, in limited circumstances, violate 
Section 5 of the FTC Act or Section 2 of the Sherman Act. However, in 
some instances, the Guides no longer accurately reflect Commission 
policy and enforcement standards. Consequently, the Commission believes 
that there is no continuing need for the Guides, and that they should 
be repealed.

Sections 248.1-248.4 and 248.6

    Sections 248.1 of the Guides prohibits industry members from using, 
or causing or promoting the use of statements, representations, 
guarantees,\5\ testimonials, or endorsements ``which ha[ve] a capacity 
and tendency or effect of misleading or deceiving purchasers. * * *'' 
Likewise, Sec. 248.2 prohibits industry members from misrepresenting, 
directly or indirectly, the character of their businesses or the types 
of services they offer; Sec. 248.3 prohibits the use of deceptive 
plaques and certificates in connection with the ``distribution, 
promotion or sale (including utilization in connection with services) 
of industry products''; Sec. 248.4 proscribes deceptive pricing; an 
Sec. 248.6 prohibits industry members from ``withhold[ing] from, or 
insert[ing] in, invoices or sales slips, any statements, or information 
by reason of which omission or insertion a false record is made * * * 
of the transactions represented on the face of such invoices or sales 
slips, with the capacity and tendency or effect of thereby misleading 
or deceiving purchasers, prospective purchasers, or the consuming 
public in any material respect.'' Each of these Guide sections 
addresses trade practices which are actionable under Section 5 of the 
FTC Act pursuant to the Commission's general Policy Statement on 
Deception (``Deception Statement''), set forth in the appendix to 
Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984) (Letter from FTC 
Chairman James C. Miller III to the Honorable John D. Dingell (October 
14, 1993)), or the Commission's Unfairness Statement set forth in the 
appendix to International Harvester, Inc., 104 F.T.C. 949, 1061, 1073-
74 (1984) (Letter from Commission Chairman Michael Pertschuk and 
Commissioners Paul Rand Dixon, David A. Clanton, Robert Pitofsky, and 
Patricia P. Bailey to the Honorable Wendell H. Ford and the Honorable 
John C. Danforth (December 17, 1980)). Moreover, the conduct proscribed 
by the aforementioned Guide sections may be actionable under Section 
43(a) of the Lanham Act, \6\ applicable state unfair competition 
statutes, and the commonlaw of commercial torts.\7\

    \5\ The Commission has adopted Guides for the Advertising of 
Warranties and Guarantees which provide detailed guidance with 
respect to guarantee and warranty representations. See 16 CFR Part 
239. Accordingly, to the extent Section 248.1 of the Beauty/Barber 
Guides relates to Guaratees, it is no longer necessary.
    \6\ 15 U.S.C. 1125(a).
    \7\ See generally, Restatement (Third) of Unfair Competition, 
Chapter 2 (1995) (hereinafter ``Restatement'').
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    In addition, Sections 248.1, 248.6, and other sections of the 
Guides specifically refer to the Commission's former ``capacity and 
tendency or effect of misleading or deceiving'' standard for deception, 
which was superseded by the Commission's Deception Statement. 
Accordingly, these sections fall to reflect the Commission's current 
policy regarding deception.
Section 248.5

    Section 248.5 of the Guides prohibits industry members from using 
or imitating a competitor's trade or corporate name, trademarks, or 
other trade designations, where such use ``has the tendency or effect 
of misleading purchasers or prospective purchasers as 

[[Page 40269]]
to the character, name, nature, or origin of any product of the 
industry or is false or misleading in any other material respect.'' The 
conduct proscribed by Section 248.5--``passing off''--has been held to 
violate Section 5 of the FTC Act,\8\ and Commission policy regarding 
such conduct is a matter of public record. Accordingly, there is no 
need for Section 248.5, which merely restates that policy and does not 
provide instruction specifically relevant to the beauty and barber 
equipment and supply industry. Moreover, the conduct prohibited by 
Section 248.5 is addressed by Section 43(a) of the Lanham Act, 
applicable state unfair trade statutes, and common law theories of 
trademark infringement.\9\

    \8\ See, e.g., Waltham Watch Co. v. FTC, 318 F.2d 28 (7th Cir.), 
cert. denied, 375 U.S. 944 (1963) (``passing off'' products as those 
of a competitor violates Section 5); Parke, Austin & Lipscomb, Inc. 
v. FTC, 142 F.2d 437 (2d Cir.), cert. denied, 323 U.S. 753 (1944) 
(false claims of association with a better known company violate 
Section 5); J. Merrell Redding, 14 F.T.C. 32 (1930) (simulation of a 
competitor's advertising violates Section 5); Lighthouse Rug Co. v. 
FTC, 35 F.2d 163 (7th Cir. 1929) (imitation of a competitor's 
corporate name and trademark violates Section 5).
    \9\ See generally, Restatement, supra note 7, Chapter 3.
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Section 248.7

    Section 248.7 of the Guides proscribes the defamation of 
competitors and the disparagement of their products. This section 
prohibits conduct which may be addressed under Section 43(a) of the 
Lanham Act and common law theories of commercial tort.\10\ There is no 
need for this section of the Guides, because it does not supplement 
this general authority with instruction specifically relevant to the 
beauty and barber equipment and supply industry.

    \10\ See generally, Restatement, supra note 7, Sec. 2, Comment 
C. See also, J.D. Lee, Modern Tort Law, Sec. 36.09 (4th ed. 1990) 
(hereinafter ``Lee'').
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Section 248.8

    Section 248.8 of the Beauty/Barber Guides proscribes the payment by 
industry members of so-called ``push money.'' This section prohibits 
industry members from providing anything of value to a salesperson 
employed by a customer of the industry member as inducement to obtain 
greater effort in promoting the resale of the industry member's 
products when: (i) the agreement or payment is made ``without the 
knowledge and consent of the salesperson's employer''; (ii) the benefit 
to the salesperson or customer is dependent on lottery; (iii) ``any 
provision of the agreement or understanding requires or contemplates 
practices or a course of conduct unduly and intentionally hampering the 
sales of products of competitors * * *''; (iv) ``the effect may be to 
substantially lessen competition or tend to create a monopoly''; or (v) 
``similar payments are not accorded to salespersons of competing 
customers on proportionally equal terms in compliance with Sections 2 
(d) and (e) of the Clayton Act.''
    To the extent that Section 248.8 prohibits industry members from 
surreptitiously compensating employees of their customers in exchange 
for greater effort on the part of those employees, it addresses 
commercial bribery, which may be prohibited under Section 2(c) of the 
Clayton Act \11\ and is proscribed by many state criminal statutes.\12\ 
To the extent that Sec. 248.8 prohibits bonus plans dependent on 
lottery, it addresses business conduct which may be proscribed by 
Section 5 of the FTC Act and by state statutes relating to lotteries 
and similar promotions.\13\ To the extent that it requires payments to 
salespersons of competing customers to be on proportionally equal 
terms, it restates general principles of competition law which are set 
forth in Section 2 of the Clayton Act and the Fred Meyer Guides. See 
Guides for Advertising Allowances and Other Merchandising Payments and 
Services, 16 CFR Part 240.

    \11\ 15 U.S.C. 13(c).
    \12\ See e.g., Cal. Penal Code Sec. 641.3 et seq. (Deering 
1995); Ill. Rev. Stat., Ch. 38, para. 29A-1 (1995); N.Y. Penal Law 
Sec. 180.00 (McKinney 1976).
    \13\ See e.g., Tex. Penal Code Sec. 32.42 (West 1995); Cal. Bus. 
& Prof. Code Sec. 17539.1 (Deering 1995); Cal. Penal Code Sec. 319 
et seq. (Deering 1995).
Section 248.9

    Section 248.9 of the Guides prohibits industry members from 
``willfully'' enticing away the employees of competitors ``with the 
intent and effect of thereby hampering or injuring competitors in their 
business or destroying or substantially lessening competition.''\14\ 
Such conduct may constitute a commercial tort.\15\ The Guides do not 
add substantial industry-specific analysis to this general authority.

    \14\ As a caveat, section 248.9 provides:
    nothing in this section shall be construed as precluding such 
persons from seeking more favorable employment, or as precluding 
employers from hiring or offering employment to employees of a 
competitor in good faith and not for the purpose of inflicting 
competitive injury.
    \15\ See generally, Lee, supra note 10, Ch. 45; William L. 
Prosser, Prosser on Torts Sec. 129 (4th ed. 1971) (hereinafter 
``Prosser'').
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Section 248.10

    Section 248.10 of the Guides prohibits industry members from 
``knowingly inducing or attempting to induce the breach of existing 
lawful contracts between competitors and their customers. * * *'' The 
conduct described in this section may be a commercial tort.\16\ There 
is no need for this section of the Guides, because it does not 
supplement this general authority with instruction specifically 
relevant to the beauty and barber equipment and supply industry.

    \16\ Lee, supra note 10, at 45; Prosser, supra note 15, at 
Sec. 129.
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Section 248.11

    Section 248.11 proscribes exclusive dealing arrangements where the 
effect on such arrangements ``may be substantially to lessen 
competition or tend to create a monopoly in any line of commerce.'' 
This section recapitulates language contained in Section 3 of the 
Clayton Act and sets out a general principle of Sherman Act Section 2 
jurisprudence--namely, that exclusive dealing may constitute an 
antitrust violation where it constitutes an attempt to monopolize or 
results in an actual monopolization of a relevant market.

Section 248.12

    Section 248.12 prohibits commercial bribery. This conduct may be 
prohibited by Section 2(c) of the Clayton Act, and by many state 
criminal statutes.\17\ There is no need for this section of the Guides, 
because it does not supplement this general authority with instruction 
specifically relevant to the beauty and barber equipment and supply 
industry.

    \17\ See supra note 12.
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Section 248.13-248.15

    Sections 248.13, 248.14 and 248.15 of the Beauty/Barber Guides 
respectively proscribe discriminatory pricing, the provision of 
discriminatory promotional allowances, and inducing price 
discrimination. Section 248.13 and 248.15 recite almost verbatim 
language contained in Sections 2 (a), (b) and (f) of the Clayton Act. 
Section 248.14 is duplicative of the Fred Meyer Guides, which interpret 
Sections 2 (d) and (e) of the Clayton Act and Section 5 of the Federal 
Trade Commission Act. See Guides for Advertising Allowances and Other 
Merchandising Payments and Services, 16 CFR part 240.

IV. Conclusion

    The Commission thus believes that the Beauty/Barber Guides do not 
provide guidance substantially specific to the beauty and barber 
equipment and supply industry. The Guides merely restate principles of 
consumer protection and commercial tort law found in statutes, case 
law, and other 

[[Page 40270]]
regulations. The Guides also describe certain conduct that may, in some 
instances, violate Sections 2 (a), (b), (c) and (d) of the Clayton Act. 
In addition, to the extent that certain conduct described by the Guides 
may substantially lessen competition in a properly defined antitrust 
market, it may violate Section 5 of the FTC Act. To the extent such 
conduct may tend to create a monopoly, it may also violate Section 2 of 
the Sherman Act. The conduct described by the Guides must be examined 
on a case-by-case basis to determine whether an applicable provision of 
law has been violated. Furthermore, in some instances, the Guides do 
not accurately represent current Commission policy and enforcement 
standards. Accordingly, the Commission has determined to repeal the 
Guides.

    Authority: 15 U.S.C. 41-58.

List of Subjects in 16 CFR Part 248

    Advertising, Cosmetics, Trade practices.

PART 248--[REMOVED]

    The Commission, under authority of Sections 5(a)(1) and 6(g) of the 
Federal Trade Commission Act, 15 U.S.C. 45(a)(1) and 46(g), amends 
chapter I of title 16 of the Code of Federal Regulations by removing 
Part 248.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 95-19544 Filed 8-7-95; 8:45 am]
BILLING CODE 6750-01-M